5 Budgeting Tips to manage your Money Better
Budgeting is an essential skill for everyone, not just for finance majors and people who are good in math. Budgeting will allow you to allocate money for various things in your life and will ensure you always have money for your needs and priorities. It also gives you control of your money rather than leaving you unable to account for a single penny of last month’s salary, despite receiving it only a week ago.
Audit your expenses
To know how to save more, you need to first understand what you have been spending your money on. So, take a deep dive into your expenses. Chances are that you are putting your money where it does not give you returns or where it produces short-lived joy you can live without. A good place to start is by listing everything you spend your money on for one month.
Set financial goals
After auditing your expenses, you will need to define your financial goals. Everyone wants to be rich, but what does rich mean to you? A million clothes? A brand new sports car? A house in a decent neighbourhood? or life savings? All these require money! Financial goals are very important since they are the rock of the rest of the goals and thus it is important to be as specific as possible when setting financial goals. This entails not just setting how you will spend money, but also how you will increase your disposable income and investments.
Use the 50 30 20 rule
There are many money rules out there, but this is what I find works for me. The rule was invented by Elizabeth Warren and it simply requires you to break down your income into 3 parts; 50% of it into needs, 30% into wants and 20% into savings. Sounds easy right? Wrong! Unless you have a clear definition of what your needs and wants are, it is easy to get the two confused. It is also important to have a diversified savings strategy, that is, not locking all your money in a Mshwari locked account or a long term scheme.
Spend like you are broke
At one point, we have all been guilty of splurging money when payday arrives only to be left in premium tears and a sorry bank account a week or two later. The trick to avoiding this situation is to spend your money like you are broke because let us be honest, you kind of are. You will not always win with this one, but keep reminding yourself until it sticks.
Review your budget regularly
You may think you are doing great and you are on track only to find yourself short of money that should have been somewhere else. Just like your goals and plans, you should frequently review them to know how good you are doing and to even create better systems that will cater more to your needs.